There was a major development yesterday in the nation's
collective desire to send at least one Wall Street bigshot to
jail after the financial crisis.

Normally, after a financial collapse and crash like the one we
had, Wall Streeters are rounded up in packs, vilified, and
incarcerated.

This time, however, no bigshot has been so much as charged with
anything, let alone sent to jail.

(The reason for this, which no regulator or Congress-person will
admit, is because the vast majority of what happened in the years
leading up to the financial crisis was legal, courtesy
of silly laws championed by the industry and enacted by Congress.
But Congress can't admit that, so Congress instead blames
prosecutors and regulators for being too wimpy.)

But now it has become clear that at least one crime was committed
at a major Wall Street bank.

MF Global used customer funds to pay off
non-customer debts while frantically trying to save itself.

That's illegal.

So the question is whether the government will be able to prove
that MF Global knew it was misusing customer funds when it did it
(I'm not an attorney, but as with other financial crimes, I
believe that, to be considered a crime, this action has to be
intentional--the "perp" has to know what he or she is doing and
know that it's wrong. If you know more, please add your thoughts
below.)

New evidence turned up by government investigators suggests that
MF Global did know what it was doing. It also suggests
that, more importantly, MF Global's CEO, Jon Corzine,
personally ordered MF Global to transfer client funds.

In the memo below, Congressional investigators describe the chain
of events and evidence in these findings.

In reading the memo, it seems clear that at least some executives
at MF Global knew that what they were doing might be wrong: The
assistant Treasurer, Edith O'Brien, was apparently reluctant to
sign a letter attesting that the transfer did not involve client
funds.

The letter also makes clear what Mr. Corzine's defense will
probably be:

Financial firms are allowed to transfer money from customer
accounts as long as there is enough "excess" cash in those
accounts to cover regulatory requirements. So, Mr. Corzine's
defense will presumably be that he thought there was enough
"excess" cash in the customer account that $175 million could be
transferred out of it without breaching the level required by
regulators.

If that is, in fact, what Mr. Corzine thought, that's a perfectly
reasonable defense.

Anyway, this new evidence will make next week's Congressional
hearing into the MF Global collapse much more exciting.